CHAPTER 7: QUESTIONS

Question 1

in the periodic invetory system, all purchases of merchandise during the period is recorded in the ___ account

Answer 1

purchases

Question 2

a continuous record of inventory is kept in a __ system

Answer 2

perpetual inventory

Question 3

when using the periodic system, ____ will remain unchanged

Answer 3

beginning inventory

Question 4

___ represents a liability on the balance sheet and records money received fr a sale or service not yet performed

Answer 4

unearned revenue

Question 5

transportation in is ___ to the cost of goosd sold

Answer 5

added

Question 6

net sales less cost of goods equals ___

Answer 6

gross profit

Question 7

__ equals gross salse less sales discounts and sales returns and allowances

Answer 7

net sales

Question 8

net purchases equals purchases less ___, ______

Answer 8

purchase discounts and purchase returns and allowances

Question 9

ending inventory is ___ from the cost of goods available for sale

Answer 9

subtracted

Question 10

net purchases are ____ to beginning inventory to get the cost of goods available for sale

Answer 10

added

Question 11

gross profit less ___ equals profit

Answer 11

expenses

Question 12

purchase discounts ____ the total cost of merchandise sold

Answer 12

reduce

Question 13

beginning inventory at the end of the period is assumed to be ___ and thus a ____

Answer 13

sold; cost

Question 14

the ending inventory of one period becomes the ____ next period

Answer 14

beginning inventory

Question 15

ending inventory represents goods not _____

Answer 15

sold

Question 16

the inventory account is ___ at the end of the period

Answer 16

adjusted

Question 17

purchases are increased by a ____

Answer 17

debit

Question 18

sales returns and allowances are used in calculating _____

Answer 18

net sales

Question 19

beginning inventory plus net purchases equals ____

Answer 19

cost of goods available for sale

Question 20

beginning inventory and ending inventory are never ____ on the worksheet

Answer 20

combined

Question 21

the chart of accounts for a merchandising entity differs from that of a service entity

Answer 21

t

Question 22

the difference between revenues from sales and cost of sales is operating income

Question 23

for cash sales, the operating cycle is from cash to inventory to accounts receivable, and back to cash

Question 24

the bill of lading is a document prepared by the seller detailing the terms of delivery

Question 25

a validated deposit slip indicates that cash and checks were actually deposited

Answer 25

t

Question 26

discounts offered to the buyer to encourae early payment are trade discounts

Question 27

cash disconts are called purchase discounts from the buyer's viewpint

Answer 27

false (i think is supposed to be true)

Question 28

the sales discounts account is a contra-incoe account and wil have a debit balance

Answer 28

t

Question 29

a credit term of 2/10, n/30 means that the buyer may deduct 2% from the invoice if payment is made within 10 days from the end of the month

Question 30

purchase returns and allowances is a deduction from purchases

Answer 30

t

Question 31

the cost of merchandise purchased during the periodis determined by subtracting rfom the net purchases the amount of transportation costs incurred during the period

Question 32

the purchase of equipment not for resale should be debited to the purchases account

Question 33

if hte seller is to shoulder the cost of delivery, the term is stated as fob destination

Answer 33

false (i think its true)

Question 34

the term freight prepaid or collect will dictate who shoulders the transportation costs

Question 35

the two main systems for accunting for merchandise are periodic and perpetual

Answer 35

t

Question 36

the perpetual inventory system requires recording the cost of each sale as it occurs

Answer 36

t

Question 37

there is no need for a physical inventory count in the perpetual inventory system

Question 38

the debit balance of the inventory account in the trial balance under the periodic inventory system is the amount of the inventory at the end of the current year

Question 39

the ending inventory of one period is the beginning inventory of the next period

Answer 39

t

Question 40

the balance in the merchandise inventory account at the beginning of hte period represents hte cost of merchnandise on hand at that time

Answer 40

t

Question 41

the operating cycle involves teh purchase and sale of inventory as well as the subsequent payment for purchases and collection of cash

Answer 41

t

Question 42

a business can shorten its operating cycle by increasig its percentage of cash sales and reducig its perentage of credit sales

Answer 42

t

Question 43

merchandise inventory could include goods that are in trnasit

Answer 43

t

Question 44

an advantage of using the periodic inventory system is that it requires less recordkeeping than the perpetual inventory system

Answer 44

true

Question 45

the periodic inventory system relies on a physical countof merchandise for its balance sheet amount

Answer 45

t

Question 46

under hte periodic inventory system, cost of goods sold is treated as an account

Question 47

hte periodic inventory system provides an up-todate amount of inventory o hand

Answer 47

f

Question 48

summing endng merchandise inventory and cost of goods sold gives the cost of goods avialable for sale

Answer 48

t

Question 49

a physical inventory is usually taken at the end of the accounting period

Answer 49

t

Question 50

der the periodic inventory system, purchases of merchandise are not recorded in the merchandise inventory account

Answer 50

t

Question 51

an entity would be more likely to know the amount of inventory on hand if it used the periodic invntory system rather htan the perpetual inventory system

Question 52

taking a physical inventory refers to making a count of all merchandise on hand at a particular time

Answer 52

t

Question 53

when the periodic inventory system is used, a physical inventory should be taken at the end of the fiscal year

Answer 53

t

Question 54

the income statement of an entity that provides services only will not have cost of goods sale

Answer 54

t

Question 55

for a merchandising entity, the difference between net sales and operating expenses is calle gross margin

Question 56

salse returns and allowances is described as a contra-revenue account

Answer 56

t

Question 57

on the income statement of a merchandising concern, profit is the amount by which net salse exceed operating expenses

Question 58

transportation out is included in the cost of goods sold calculation

Question 59

advertising expense appears as a selling expense on the income statemnet

Answer 59

t

Question 60

transportation in is considered a cost of merchandise purchases

Answer 60

t

Question 61

the difference between gross sales and net sales is equal to the sum of sales discounts, and sales returns and allowances

Answer 61

t

Question 62

when the terms of sale include a sales discount, it usually is advisable for the buyer to pay within the discount period

Answer 62

t

Question 63

the terms 2/10, n/30 mean that a 2% discount is allowed on payments made over 10 but before 30 days afer the invoice date

Question 64

terms of 2/10, n/30 is an example of a trade discount

Question 65

goods should be recorded at their list price less any trade discounts involveed

Answer 65

t

Question 66

fob shipping point means that the seller incurs the shipping costs

Question 67

under the perpetual inventory system, the cost of merchandise is debited to merchandise inventory at the time of purchase

Answer 67

t

Question 68

the merchandise inventory account is not affected when a sales allowance is granted

Answer 68

t

Question 69

ending merchandise inventory is included in the calculation of cost of goods available for sale

Question 70

ending merchandise inventory for year 1 automaticlaly becomes beginning merchandise inventory for year 2

Answer 70

t

Question 71

the calculation of cost of goods availalbe for sale during the year is not affected by the previous year's ending inventory

Question 72

hte change in inventory level from the beginning to the end of the year affects cost of goods sold

Answer 72

t

Question 73

transportation in is treated as a deduction in the cost of goos sold section of the income statement

Question 74

under the periodic inventry system, the purchases account is used to accumulate all purchases of merchandise for resale

Answer 74

t

Question 75

this is an authorization made by the buyer to the seller to deliver the merchandise as detailed in hte form

Answer 75

purchase order

Question 76

it is the discount taken by the buyer for the early payment of an invoice

Answer 76

prchases discounts

Question 77

the document issued by the seller authorizing the return of merchandise or the grant of an allowance

Answer 77

credit memorandum

Question 78

this document eviedences the receipt of cash by the seller

Answer 78

official receipt

Question 79

this transportation arrangement passes ownership to the goods to the buyer only when the buyer receives the merchandise

Answer 79

fob destination

Question 80

under this inventory system, revenue from sales are recorded when salse are made, but no attempt is made n the sales date t record the cost of goods sold

Answer 80

periodic inventory system

Question 81

under this inventory system, both the sales amount nad the cost of goods sold amount are recorded when each item of merchandise is sld

Answer 81

perpetual inventory system

Question 82

hte documet prepared by the seller of goods and sent to a buyer detailing the specifics of a sale

Answer 82

invoice

Question 83

this discount encourages the buyers topurchase goods because of markdowns from the list price

Answer 83

trade discouts

Question 84

this is the shipping term if the buyer shoulders the shipping costs

Answer 84

fob shipping point